René Benko is one of the most dazzling real estate dealers. Taxpayers have already saved his Galeria Kaufhof group with a total of 680 million euros. It wasn't enough. The future of the department store group is once again on the razor's edge. What Benko is up to is unclear.
At Galeria Kaufhof it's time to start again. The last major German department store chain, which emerged from Kaufhof and Karstadt in 2018, had to go to the insolvency court again on Monday and seek rescue in protective shield proceedings. In less than two years, the group asked for state aid for the third time. This time they were only offered to him with a high financial participation.
Galeria Kaufhof is part of René Benko's Sigma Holding. The Tyrolean real estate investor would have preferred it if the federal government had approved a supplement of 250 million euros. But the company has already tanked a whopping 680 million euros from tax money in recent years - bad tongues say sunk. This time he is therefore denied deep access to the state purse. The fear of good money being thrown after bad is simply too great.
Because the lavish cash injections could not prevent many branches from being closed and many employees being laid off in recent years. The bleeding kept going. Insolvency administrator Arndt Geiwitz has again announced severe cuts. Only a hard core should remain of the current 131 department stores, he told WDR. Which ones will be decided in three months at the latest.
The question is who is to blame? Is it the crises, first the pandemic with the lockdowns, followed by inflation and customers’ reluctance to buy? Or has the department store business model become obsolete and owner Benko failed to come up with new ideas to secure the future of the department store chain? The answer is difficult.
The fact is: the department store empire is no better positioned today. The many hundreds of millions of euros did not bring the results that had been hoped for. Benko is accused of poorly implementing agreements and failing to provide reliable evidence of successful restructuring within the group.
Investors see his recent call for a cash injection as bold. Because while the department store giant Galeria Kaufhof is in a precarious financial situation, the real estate transactions Benko's Signa Group recently brought a profit of one billion euros. Galeria, on the other hand, accumulated a loss of 620 million euros last year. Not only the reservations against the self-confident real estate dealer have suffered. His down-to-earth approach to financial matters also seems to have been lost.
Alarm bells are ringing at Verdi. Has Benko contributed enough to the survival of the last major German department store group and its employees? Does it mean the end if the taxpayer no longer feeds Benko's empire?
How often can an insolvent department store group be revived? You can't ask what Benko intends to contribute at the moment. "Our colleagues in the 131 department stores are wondering where the owner is in this existentially extremely threatening situation for 17,400 people and their families," complains board member Stefanie Nutzberger.
The fact that Benko is currently avoiding the public could have to do with legal reasons in Austria. A search took place in his Signa holding company in mid-October. Authorities suspect him of having offered a top Treasury official a job at Signa in order to influence a tax audit. In addition, Benko is accused of bribery for alleged donations from real estate entrepreneurs. The trial begins in November in Vienna. Germany's financial regulator Bafin is also targeting Benko and examining Signa transactions.
The billionaire's reputation has suffered badly. Some ask: How bold can an entrepreneur be? The others maybe: Is this man just a slob who is fooling everyone? Apparently this doesn't hurt his self-confidence. Just two days after the searches in his Vienna offices, he boasted in a video call with the words: "I have never lost a single cent on a single investment." An investor quoted by the "Süddeutsche Zeitung" comments on this with the words: "He's a really good seller."
But not only Benko's image has been damaged. His business model also raises questions. It just doesn't seem up to date anymore. Money was cheap when interest rates were low. With Corona, rents have fallen. Interest rates are now rising and cheap mortgage loans are being phased out. How should Signa restructure? Observers are already warning: Benko and his business could turn out to be a cluster risk for the lending banks. For this reason in particular, further state aid appears risky.
Benko himself seems to have great doubts that he will get very far with his model. He rejected the request from the federal government to shoulder half of the required aid for the group if the state were to churn it out again. The most he would bid was 15 percent of the total.
In order for Galeria Kaufhof to continue paying generous rents to Sigma, the group has to be liquid. But if the money doesn't come from buyers or in the form of state aid, where does it come from? Benko's business model is well on the way to becoming obsolete.
